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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The most desirable alternative given up as the result of a decision
Necessity
Non-collusive oligopoly
Opportunity Cost
Marginal Benefit (MB)
2. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Negative externality
Average Fixed Cost (AFC)
Long Run
Subsidy
3. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Cross-Price Elasticity of Demand
Cartel
Price inelastic demand
Complementary Goods
4. Entry of new firms shifts the cost curves for all firms downward
Income Effect
Decreasing Cost industry
Price Ceiling
Total Fixed Costs (TFC)
5. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Private goods
Economic Profit
Determinants of Demand
Resources
6. ATC = TC/Q = AFC + AVC
Constrained Utility Maximization
Total Revenue
Average Total Cost (ATC)
Marginal Benefit (MB)
7. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Excise Tax
Monopolistic competition long-run equilibrium
Average Fixed Cost (AFC)
Economic Profit
8. Exists if a producer can produce a good at lower opportunity cost than all other producers
Fixed inputs
Public goods
Accounting Profit
Comparative Advantage
9. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Natural Monopoly
Spillover costs
Private goods
Incidence of Tax
10. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Economic Profit
Price elasticity
Necessity
Marginal tax rate
11. The sum of consumer surplus and producer surplus
Total Welfare
Price Elasticity of Supply
Production function
Producer surplus
12. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Total Product of Labor (TPL)
Private goods
Inferior Goods
Oligopoly
13. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Utility Maximizing Rule
Market power
Consumer surplus
Complementary Goods
14. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Explicit costs
Absolute prices
Market Equilibrium
Four-firm concentration ratio
15. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Market Equilibrium
Private goods
Average Total Cost (ATC)
Marginal Product of Labor (MPL)
16. The additional benefit received from the consumption of the next unit of a good or service
Perfectly competitive long-run equilibrium
Economies of Scale
Dead Weight Loss
Marginal Benefit (MB)
17. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Least-Cost Rule
Normal Profit
Shortage
Positive externality
18. The mechanism for combining production resources - with existing technology - into finished goods and services
Production function
Scarcity
Luxury
Law of Increasing Costs
19. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Decreasing Cost industry
Law of Demand
Demand for Labor
Oligopoly
20. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Constant Returns to Scale
Allocative Efficiency
Long Run
Economies of Scale
21. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Variable inputs
Luxury
Law of Diminishing Marginal Utility
Short run
22. A firm that has market power in the factor market (a wage-setter)
Law of Increasing Costs
Monopsonist
Unit elastic demand
Price elasticity
23. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Free-Rider Problem
Necessity
Allocative Efficiency
Subsidy
24. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Non-collusive oligopoly
Price Elasticity of Supply
Allocative Efficiency
Implicit costs
25. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Price inelastic demand
Opportunity Cost
Derived Demand
Average Total Cost (ATC)
26. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Relative Prices
Incidence of Tax
Market power
Perfect competition
27. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Non-collusive oligopoly
Total Revenue
Profit Maximizing Resource Employment
Absolute Advantage
28. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition
Subsidy
Non-collusive oligopoly
Determinants of Demand
29. TR = P * Qd
Cross-Price Elasticity of Demand
Total Revenue
Price elasticity
Determinants of Labor Demand
30. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Substitution Effect
Negative externality
Marginal Resource Cost (MRC)
Law of Demand
31. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Determinants of elasticity
Positive externality
Marginal Product of Labor (MPL)
Monopolistic competition long-run equilibrium
32. Ed = 0 - no response to price change
Perfectly inelastic
Average Fixed Cost (AFC)
Opportunity Cost
Spillover benefits
33. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Resources
Specialization
Total Fixed Costs (TFC)
Shortage
34. Ei > 1
Luxury
Consumer surplus
Marginal Cost (MC)
Economic Growth
35. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Price floor
Perfectly elastic
Total Revenue
Positive externality
36. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Demand for Labor
Price elasticity
Economics
Cross-Price Elasticity of Demand
37. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Determinants of elasticity
Luxury
Decreasing Cost industry
Incidence of Tax
38. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Marginal Productivity Theory
Cross-Price Elasticity of Demand
Constrained Utility Maximization
Economic Growth
39. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Positive externality
Specialization
Price Ceiling
Monopoly
40. The practice of selling essentially the same good to different groups of consumers at different prices
Variable inputs
Utility Maximizing Rule
Price discrimination
Excise Tax
41. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Marginal Product of Labor (MPL)
Price Elasticity of Supply
Total Revenue Test
Average Variable Cost (AVC)
42. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Determinants of elasticity
Comparative Advantage
Average Fixed Cost (AFC)
Shutdown Point
43. AVC = TVC/Q
Derived Demand
Average Variable Cost (AVC)
Spillover costs
Normal Profit
44. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Monopolistic competition
Determinants of Supply
Excise Tax
Perfectly competitive long-run equilibrium
45. Exists if a producer can produce more of a good than all other producers
Profit Maximizing Resource Employment
Least-Cost Rule
Law of Diminishing Marginal Utility
Absolute Advantage
46. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Collusive oligopoly
Economies of Scale
Consumer surplus
Complementary Goods
47. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Market Economy (Capitalism)
Economic Profit
Fixed inputs
Surplus
48. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Marginal Revenue Product (MRP)
Surplus
Implicit costs
Marginal Product of Labor (MPL)
49. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Cartel
Determinants of elasticity
Absolute prices
Incidence of Tax
50. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Average Fixed Cost (AFC)
Substitute Goods
Spillover costs
Constant cost industry